Release Details

Farmers & Merchants Bancorp, Inc. Reports 2017 Second-Quarter and Year-to-Date Financial Results

July 19, 2017

ARCHBOLD, Ohio, July 19, 2017 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq:FMAO) today reported financial results for the 2017 second quarter and year-to-date June 30, 2017.

2017 Second Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 57 consecutive quarters of profitability
  • Total assets up 4.4% to $1,066,175,000
  • Total loans increased 8.3% to $790,838,000
  • Net interest income after provision for loan losses increased 10.6% to $8,846,000
  • Net income increased 8.4% to $3,223,000
  • Earnings per basic and diluted shares increased 7.7% to $0.70
  • Declared quarterly dividend increased 8.7% to $0.25 per share
  • Return on average assets was 1.21%, up from 1.17%
  • Return on average equity was 9.96%, up from 9.61%

“Record total loans outstanding and higher rates drove a 7.7% increase in F&M’s diluted earnings per share for the 2017 second quarter,” stated Paul S. Siebenmorgen, President and Chief Executive Officer.  “In addition, during the second quarter F&M achieved several significant milestones including appearing in American Banker Magazine’s Top 200 Publicly Traded Community Banks and Thrifts, listing our common stock on the NASDAQ Capital Market, joining the Russell 3000® index, and increasing the second quarter declared cash dividend by 8.7% to $0.25 per share.  F&M’s strong year-to-date results reflect the platform we have created to drive sustainable and profitable growth.  With leading market share in many of our communities, we are focused on increasing our presence in larger, higher growth markets.  To this end, our new branches in Bowling Green, Ohio and Huntertown, Indiana are operating in line with our expectations.  Both branches have strong, experienced, and motivated teams that are quickly establishing themselves within their local communities.” 

Income Statement
Net income for the 2017 second quarter ended June 30, 2017 was $3,223,000, or $0.70 per basic and diluted share compared to $2,974,000, or $0.65 per basic and diluted share for the same period last year. The 8.4% improvement in net income for the 2017 second quarter was primarily due to a 10.6% increase in net interest income after provision for loan losses, partially offset by a slight decline in noninterest income, and by a small increase in noninterest expenses.  Net income for the 2017 first half was $6,062,000, or $1.31 per basic and diluted share compared to $5,455,000, or $1.18 per basic and diluted share for the first half of 2016. 

Loan Portfolio and Asset Quality
Total loans at June 30, 2017 increased 8.3% to a record $790,838,000, compared to $729,915,000 at June 30, 2016, and up 4.0% from $758,820,000 at December 31, 2016.  Year-over-year loan growth was strong across many of the company’s lending areas and included a 17.8% increase in commercial and industrial loans, a 16.2% increase in consumer loans, an 11.2% increase in industrial development bonds, a 10.3% increase in commercial real estate loans, a 6.3% increase in agricultural real estate loans, and a 0.4% increase in agricultural loans, partially offset by a 4.7% reduction in consumer real estate loans. 

The company’s provision for loan losses for the 2017 second quarter was $25,000, compared to $339,000 for the 2016 second quarter. Year-to-date, the provision for loan losses was $98,000, compared to $616,000 for the same period last year. The second quarter and year-to-date decrease in provision expense was a result of low charge offs, and stable asset quality within the company’s loan portfolio. 

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 502.2% at June 30, 2017, compared to 424.9% at June 30, 2016.  Net charge-offs for the second quarter ended June 30, 2017 were $17,000, or 0.00% of average loans, compared to $131,000 or 0.02% of average loans, at June 30, 2016. Year-to-date, net charge-offs were $24,000, or 0.00% of average loans outstanding, compared to $180,000, or 0.01% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $126,582,000 at June 30, 2017, compared to $120,763,000 at December 31, 2016, and $119,913,000 at June 30, 2016.  On a per share basis, tangible stockholders’ equity at June 30, 2017 was $27.39, compared with $26.13 at December 31, 2016, and $26.04 at June 30, 2016. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At June 30, 2017, the company had a Tier 1 leverage ratio of 11.96%, compared to 11.74% at June 30, 2016. 

For the 2017 second quarter, the company declared cash dividends of $0.25 per share.  The dividend payout ratio at June 30, 2017 was 35.5% compared to 35.3% for the same period last year.

Mr. Siebenmorgen concluded, “F&M remains committed to becoming our customers’ Bank for Life.  As a result, we must successfully manage growth with credit risk, and F&M continues to report strong asset quality.  At June 30, 2017, non-performing assets declined 28.2% and net charge-offs declined 87.0% from the prior year period, while our loan portfolio has increased 8.3%.  Continued loan growth, proactive cost management, and strong asset quality, has helped improve profitability. Reflecting continued improvements in profitability and F&M’s focus on creating value for shareholders, F&M’s board of directors approved an 8.7% increase in our quarterly dividend, representing the 18th consecutive year we have increased our dividend payment. As you can see, operating and financial momentum remained strong in the second quarter and we expect 2017 will be another good year for the bank.”

About Farmers & Merchants State Bank:
The Farmers & Merchants State Bank is a local independent community bank that has been serving Northwest Ohio and Northeast Indiana since 1897. The Farmers & Merchants State Bank provides commercial banking, retail banking and other financial services through its 24 offices. Our locations are in Fulton, Defiance, Henry, Lucas, Williams, and Wood counties in Northwest Ohio. In Northeast Indiana, we have offices located in DeKalb, Allen and Steuben counties.

Safe harbor statement
Farmers & Merchants Bancorp, Inc. ("F&M") wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. Statements by F&M, including management's expectations and comments, may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Act of 1934, as amended. Actual results could vary materially depending on risks and uncertainties inherent in general and local banking conditions, competitive factors specific to markets in which F&M and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions. F&M assumes no responsibility to update this information. For more details, please refer to F&M's SEC filing, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Such filings can be viewed at the SEC's website, www.sec.gov.

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (UNAUDITED)
(in thousands of dollars, except per share data)
   
      Three Months Ended   Six Months Ended  
      June 30, 2017 June 30, 2016   June 30, 2017 June 30, 2016  
Interest Income                          
Loans, including fees $ 9,120     $ 8,362     $ 17,820     $ 16,368    
Debt securities:              
U.S. Treasury and government agencies   623       595       1,265       1,175    
Municipalities     300       380       615       749    
Dividends     44       37       86       75    
Federal funds sold     3       2       3       2    
Other         34         11         56         22    
Total interest income   10,124       9,387       19,845       18,391    
Interest Expense              
Deposits     1,098       885       2,128       1,739    
Federal funds purchased and securities sold          
under agreements to repurchase   118       126       231       231    
Borrowed funds       37         36         73         73    
Total interest expense     1,253         1,047         2,432         2,043    
Net Interest Income - Before Provision for Loan Losses   8,871       8,340       17,413       16,348    
Provision for Loan Losses      25         339         98         616    
Net Interest Income After Provision                        
For Loan Losses     8,846       8,001       17,315       15,732    
Noninterest Income              
Customer service fees   1,330       1,308       2,811       2,786    
Other service charges and fees   1,209       999       2,080       1,909    
Net gain on sale of loans   218       234       419       403    
Net gain on sale of available for sale securities     16         343         47         456    
Total noninterest income   2,773       2,884       5,357       5,554    
Noninterest Expense              
Salaries and Wages     3,137       2,840       6,138       5,680    
Employee benefits     783       715       1,705       1,577    
Net occupancy expense   374       346       787       724    
Furniture and equipment   491       443       963       855    
Data processing     308       361       619       772    
Franchise taxes     225       225       450       439    
Net loss on sale of other assets owned   14       -       14       45    
FDIC Assessment     82       121       165       242    
Mortgage servicing rights amortization   97       99       181       188    
Other general and administrative     1,587         1,507         3,147         3,121    
Total other operating expenses     7,098         6,657         14,169         13,643    
Income Before Income Taxes   4,521       4,228       8,503       7,643    
Income Taxes       1,298         1,254         2,441         2,188    
Net Income         3,223         2,974         6,062         5,455    
Other Comprehensive Income (Net of Tax):          
Net unrealized gain on available for sale securities   2,044       649       2,456       2,594    
Reclassification adjustment for gain on sale of available for
  sale securities
    (16 )       (343 )       (47 )       (456 )  
Net unrealized gain on available for sale securities   2,028       306       2,409       2,138    
Tax expense       690         104         819         727    
Other comprehensive income   1,338       202       1,590       1,411    
Comprehensive Income   $   4,561     $   3,176     $   7,652     $   6,866    
Earnings Per Share - Basic and Diluted $   0.70     $   0.65     $   1.31     $   1.18    
Dividends Declared    $   0.25     $   0.23     $   0.48     $   0.45    
                                     

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
      (in thousands of dollars)  
      June 30, 2017 December 31, 2016  
      (Unaudited)        
Assets          
Cash and due from banks     $ 28,613     $ 27,348    
Federal funds sold         646         974    
Total cash and cash equivalents   29,259       28,322    
           
Interest-bearing time deposits       2,541       1,915    
Securities - available-for-sale       195,582       218,527    
Other securities, at cost       3,717       3,717    
Loans held for sale       1,666       2,055    
Loans, net       783,980       751,310    
Premises and equipment       20,942       21,457    
Goodwill       4,074       4,074    
Mortgage servicing rights       2,230       2,192    
Other real estate owned       630       774    
Bank owned life insurance       14,334       14,376    
Other assets         7,220         7,176    
                     
Total Assets     $   1,066,175     $   1,055,895    
Liabilities and Stockholders' Equity    
Liabilities          
Deposits          
Noninterest-bearing $ 189,770     $ 186,390    
Interest-bearing      
NOW accounts   274,236       230,446    
Savings     226,505       226,537    
Time       186,964         198,830    
Total deposits     877,475       842,203    
           
Federal Funds purchased and          
   securities sold under agreements to repurchase       40,095       70,324    
Federal Home Loan Bank (FHLB) advances       10,000       10,000    
Dividend payable       1,144       1,053    
Accrued expenses and other liabilities         6,226         6,738    
Total liabilities       934,940         930,318    
                     
Commitments and Contingencies          
           
Stockholders' Equity          
Common stock - No par value 10,000,000 shares authorized;       12,150       11,947    
  issued and outstanding 5,200,000 shares 6/30/17 and 12/31/16          
Treasury Stock - 579,125 shares 6/30/17, 579,125 shares 12/31/16       (12,267 )     (12,267 )  
Retained earnings       131,734       127,869    
Accumulated other comprehensive loss         (382 )       (1,972 )  
Total stockholders' equity       131,235         125,577    
                     
Total Liabilities and Stockholders' Equity     $   1,066,175     $   1,055,895    
                     

 

    For the Three Months Ended   For the Six Months Ended
    June 30   June 30
Selected financial data   2017     2016   2017     2016
Return on average assets 1.21 %     1.17 %   1.14 %     1.08 %
Return on average equity 9.96 %     9.61 %   9.47 %     8.90 %
Yield on earning assets 4.11 %     3.99 %   4.05 %     3.98 %
Cost of interest bearing liabilities 0.68 %     0.58 %   0.66 %     0.58 %
Net interest spread 3.43 %     3.41 %   3.39 %     3.40 %
Net interest margin 3.61 %     3.56 %   3.56 %     3.55 %
Efficiency   60.27 %     60.15 %   61.53 %     62.56 %
Dividend payout ratio   35.49 %     35.34 %   36.24 %     37.69 %
Tangible book value per share $ 27.39     $ 26.04            
Tier 1 capital to average assets   11.96 %     11.74 %          
                     
    June 30          
Loans   2017     2016          
(Dollar amounts in thousands)                  
Commercial real estate $ 394,649     $ 357,838            
Agricultural real estate   64,035       60,253            
Consumer real estate 84,307       88,464            
Commercial and industrial 122,950       104,336            
Agricultural 83,614       83,287            
Consumer   35,394       30,458            
Industrial development bonds 6,617       5,952            
Less: Net deferred loan fees and costs (728 )     (673 )          
Total loans $ 790,838     $ 729,915            
                     
    June 30          
Asset quality data   2017     2016          
(Dollar amounts in thousands)                  
Nonaccrual loans $ 1,365     $ 1,528            
Troubled debt restructuring $ 662     $ 795            
90 day past due and accruing $ -     $ -            
Nonperforming loans $ 1,365     $ 1,528            
Other real estate owned $ 630     $ 1,252            
Non-performing assets $ 1,995     $ 2,780            
                     
(Dollar amounts in thousands)                  
Allowance for loan and lease losses $ 7,077     $ 6,493            
Allowance for loan and lease losses/total loans   0.89 %     0.89 %          
Net charge-offs:                    
Quarter-to-date $ 17     $ 131            
Year-to-date $ 24     $ 180            
Net charge-offs to average loans                    
Quarter-to-date   0.00 %     0.02 %          
Year-to-date   0.00 %     0.01 %          
Non-performing loans/total loans   0.17 %     0.21 %          
Allowance for loan and lease losses/nonperforming loans   502.23 %     424.86 %          
Company Contact:
Marty Filogamo
Senior Vice President – Marketing Manager
Farmers & Merchants Bancorp, Inc.
(419) 445-3501 ext. 15435
mfilogamo@fm.bank

Investor and Media Contact:
Andrew M. Berger
Managing Director
SM Berger & Company, Inc. 
(216) 464-6400
andrew@smberger.com